Here Are The Most Important Stock Charts To Watch

Since the start of 2014, the U.S. stock market has been buffeted by an array of crosscurrents including the emerging markets rout in January, ongoing speculation about the timing of the Federal Reserve's taper schedule, the Russian-Ukrainian conflict, and the recent sell-off in technology-related shares. The U.S. stock market has remained surprisingly resilient in the face of these worrisome events. A quick glance at the charts of the major U.S. stock indices shows important new technical patterns and levels that are likely to determine whether the market will maintain its strength or finally succumb to the turbulence that has roiled other markets around the globe.

For the past several months, the Dow has been struggling to break its key resistance level that is located at roughly 16,600. This resistance level must be broken above for another bullish confirmation signal to be given. The Dow's 200 day moving average continues to slope upward, which means that the index is still in a confirmed uptrend:

The SP500 shows a similar pattern to the Dow and is trading just below an important resistance level at roughly 1,890. The SP500 is still above its rising support line and upward-sloping 200 day moving average, which indicates that the stock average’s momentum is biased toward the upside in the intermediate term:

The tech-heavy Nasdaq Composite, however, is showing more signs of weakness than the more diversified Dow and SP500. April's tech stock sell-off has caused the Nasdaq to break below its rising support line that started in June 2013 - an indication of a likely change of the index's trend. In addition, there may be a bearish head and shoulders or a similar topping pattern forming since the beginning of the year, which would be confirmed by a break below both the neckline support at 4,000 and the 200 day moving average:

This market is unusually prone to fakeout and "whipsaw"-type moves in recent years thanks to incessant central bank intervention, so using stop loss orders is more important now than ever. For example, if the Nasdaq breaks below its neckline support level at 4,000, it is prudent (if shorting the Nasdaq) to keep a stop loss order just above that level in case the index manages to create a "bear trap" or a move in which it breaks back above 4,000. The same advice applies to a possible bullish breakout above the Dow and SP500's key resistance levels. The tendency for the markets to whipsaw technical traders is a major reason why I don't make predictions about short-term market movements, but prefer instead to approach the markets with a reactive stance in addition to using tight stop loss orders.

Please follow me on Twitter, Google+ and Facebook to stay informed about the most important trading and bubble news as well as my related commentary.

(Disclaimer: All information is provided for educational purposes only and should not be relied on for making any investment decisions.)